Tuesday, June 19, 2018

If you have any interest in how the Ring Magazine Ratings Panel or Transnational Boxing Rankings Board works, you'll enjoy this week Cooper's Corner podcast. I joined Aaron Cooper of Intu Boxing this week to talk a little bit about how the sausage gets made and what role the rankings boards play in the boxing landscape. We also discussed the welterweight division. When will Spence-Crawford happen and if so, who wins that fight? And will we ever see Keith Thurman back in the ring? I think you'll find a lot of interesting stuff in this discussion. To listen to the podcast click here.

Sunday, June 10, 2018

I joined Kurt Emhoff's Boxing Esq. Podcast this week to talk about how the Matchroom-DAZN and Top Rank-ESPN deals will affect the American Boxing TV landscape. We examined the state of the four main boxing players in America (Showtime, ESPN, HBO, DAZN) and if there a way for them to work together to grow boxing's footprint. We also explored the possibility of additional boxing tournaments to help build the buzz in the sport. To listen to the podcast, click here.

Thursday, June 7, 2018

This week's Punch 2 the Face Podcast looked ahead to a jam-packed fight weekend. Brandon and I previewed Crawford-Horn, Santa Cruz-Mares II, Flanagan-Hooker and the return of Tyson Fury. We also discussed the IBF stripping Gennady Golovkin of his title and what this means for the middleweight division. Joe DeGuardia from Star Boxing also joined us to talk about what's next for Demetrius Andrade and Joe Smith Jr.

Monday, June 4, 2018

Eddie
Hearn, Managing Director of Matchroom Sport LTD, the leading boxing promoter in
the U.K., announced on May 10 that he had signed a deal with The Perform Group
to promote 16 American-based boxing shows a year on DAZN, a streaming service
that currently provides content such as American football, soccer and other
sports in Canada, Japan, Germany, Switzerland and Austria.

The
deal is estimated at $1 billion dollars over an eight-year period (the
agreement was announced in British pounds, so there may be some slight currency
fluctuations over the term of the deal). The initial arrangement guarantees two
years for approximately $250 million dollars with Hearn having options for the
subsequent six years. In reading the Perform Group's prospectus, there is, of
course, fine print whereby if certain measures aren't met then it's possible
that the deal could be terminated earlier. But let's say that the initial
two-year deal proves to be a success and it continues for the announced
duration of eight years. With his new war chest, Hearn will have the
opportunity to reshape the American boxing landscape.

Through
simple arithmetic of 16 cards a year and $125 million in year one (one-eighth
of the $1 billion dollars), it's clear that Hearn will have a per-show budget
that far exceeds the existing American competition. It's unlikely that each
fight card will have a rights fee of $7.8 million, which would be the $125
million divided by 16. After all, there are startup costs with Hearn hiring new
employees for his American office, buying or leasing office space, investing in
technology and marketing.

But even
if 20% of the total was used for SG&A (sales, general and administrative
expenses) that still leaves a $6.25 million rights fee per show. By contrast,
HBO has an annual boxing budget estimated at $25-30 million dollars. Showtime's
per-show rights fees for even its highest-profile broadcasts rarely break $4M.
Top Rank has guarded its financial deal points with ESPN as tight as Ft. Knox,
but from the purse information that has been released publicly, it's unlikely
that the company has approached $6.25M per card.

Courtesy of Ed Mullholland/Matchroom Sports USA

In the
immediate aftermath of the DAZN announcement, Hearn started to pitch
prospective fighters, publicly stating that he would be targeting top boxers
who didn't have a promotional contract. That was a shot across the bow of the
PBC fighters who are either managed or advised by power broker Al Haymon. After
the winding down of the PBC experiment, whereby Haymon Boxing established time
buys on all of the major American networks (CBS, NBC, FOX and ABC [via ESPN]),
the PBC's major fighters now appear almost exclusively on Showtime. With few
exceptions, PBC fighters don't have promotional contracts. Due to the Muhammad
Ali Act of 2000, in America boxers cannot be managed and promoted by the same
entity; Haymon chose the managerial route in establishing his boxing empire
instead of the promotional one.

Since
the DAZN announcement, Hearn has made overtures to several PBC fighters,
including Adrien Broner, Deontay Wilder, Jermell and Jermall Charlo and Keith
Thurman (these names have either been confirmed publicly by the fighters
themselves or widely rumored in the industry). To this point, no major American
boxer has officially made the jump to Hearn and DAZN. Hearn claims that he has
six signed contracts with American fighters, but their names have not been
publicly announced and it's not known if these boxers are high-profile signees.
It should also be noted that Hearn has an existing contract with American
middleweight Daniel Jacobs, who has at least one more fight on his HBO
contract. Hearn has announced his intention to start his new series in
September, 2018. The official monthly or yearly subscription fee for DAZN in
the United States has yet to be confirmed.

II. Top
Rank and ESPN

Top Rank
announced a significant deal with ESPN in August of 2017, whereby the company
would broadcast up to 18 shows a year on the network and the ESPN mobile app
(now rebranded as ESPN+). The deal contained the option of specific shows
appearing via ESPN pay per view. The duration of the agreement was for a
minimum of four years. In 2018, the deal was amended to include up to 24
fight cards a year, with some shows available on both the linear ESPN channel
and app while others only available via the app. As a result of this
partnership, Top Rank removed its fighters from HBO, where the promotional
company had been a content provider for over 30 years.

According
to a few sources in the industry, the structure of this deal is a hybrid of the
PBC time buy model and the traditional rights fee broadcast. Some aspects of
the agreement have been made public: Top Rank has made many of its classic
fights available via ESPN+. ESPN has agreed to a marketing spend. There will be
the creation of shoulder programming for the series. ESPN will integrate its
boxing content with other assets such as SportsCenter. The network retains some
say in the talent hired to broadcast the series. Blow-by-blow man Joe Tessitore
and ringside reporter Bernardo Osuna were ESPN employees prior to the Top Rank
deal and remain on the ESPN/Top Rank broadcasts. While it's likely that ESPN is
paying some money for production costs and guarantees certain premium dates for
broadcasts, it's unclear what (if any) the network is paying for the rights for
each fight card.

Top Rank
has been perhaps the most successful American boxing promoter over the last 40
years; the company didn't agree to this deal because of a sense of charity –
there is a financial upside for them, and a potentially significant one. But
it's one that is closely guarded. Perhaps the company receives a minimum rights
fee per broadcast, but maybe the main financial windfall manifests according to
the growth of the ESPN+ app. Certainly there could be bonuses and incentives
tied to TV ratings and app users.

Since
the deal commenced, Top Rank has brought a number of major boxing events to
ESPN, including Pacquiao-Horn and Lomachenko-Linares. Several successful
smaller shows such as Valdez-Quigg, Beltran-Moses and Magdaleno-Dogboe have
also been televised by the network. In addition, Top Rank has been aggressive
in bringing international fights to U.S. boxing fans via the ESPN+ app, which
retails for $4.99 a month.

III.
Challenges with Streaming

Ironically,
one of the stated reasons why Top Rank head Bob Arum switched from HBO to ESPN
is that the latter had far more eyeballs. HBO is available in roughly 30
million homes while ESPN is available in an estimated 85-87 million (this
number continues to shrink, more on this later). Yet, many of Top Rank's
broadcasts as part of the new deal will appear only via ESPN+, which has only a
fraction of the number of users/viewers that HBO does. On June 9th, one of
Top Rank's signature boxers, Terence Crawford, will fight Jeff Horn and the
bout will be broadcasted exclusively via the ESPN+ app. Certainly this is the
type of matchup that Top Rank and ESPN think will drive new users to the app.

However,
it seems unlikely that the winner of Crawford-Horn will see his profile rise
significantly in the sport, because he won't be fighting in front of many
viewers. According to a number of recent surveys that I've read, the average TV age for boxing in America is estimated between 47 and 50 years old. You can bet
that many of HBO's core 0.9-1.2 million boxing subscribers will not be
registered on ESPN+ by June 9th. So even if Crawford or Horn should look great,
who will be watching and how does fighting in front of fewer people increase
the demand for their services?

Photo courtesy of Mikey Williams/Top Rank

One initial
challenge with the switch to streaming services, also called OTT (over-the-top)
platforms, is the disruption of routine for boxing fans. Generations of boxing
enthusiasts have become accustomed to watching fights on their TV. Find the
channel, find the time and voila! Now there are extra steps involved to watch
OTT content on a television. A user needs high speed internet access, a fire
stick or a Roku player, a TV with an HDMI input (which most have), some wires,
which function as adapters, and the technical knowhow to synch everything up
properly. For many conversant with newer technologies and OTT, this process may
not sound onerous or cumbersome, but there certainly will be some who determine
that it's not worth the hassle, or at least not yet.

For
many, boxing is a communal event, to be enjoyed with family and friends.
Watching a fight on a phone or via tablet just doesn't have the same convivial
spirit. Boxing is often passed down from father to son or from grandfather to
grandson; it would be a shame if there's a breach in that lineage because of
technology and how the sport ultimately gets consumed.

Another
issue with the switch to OTT is the inability of casual sports fans to find
premium boxing content on their TV. We all have flipped through channels and
stumbled upon a good fight, and kept watching. These moments created positive
associations with the sport. For non-boxing fans, these positive associations
can help lead to a more consistent following of the sport – the creation of new
boxing enthusiasts. Although there will still be boxing content on TV in the
existing media landscape, more higher-profile fights – the types of matchups
that create new fans – won’t be as readily accessible as it was before. This is
a negative consequence of OTT, an increased difficulty in attracting new boxing
supporters.

But at
least ESPN has the scroll on the bottom of the screen and many platforms to
announce upcoming boxing programming. ESPN is a trusted entity in sports and
the goodwill that the network has built up over the previous generations will
at least confer some legitimacy upon the ESPN+ app.

DAZN
enters the market with zero brand awareness in the U.S. No one in the country
has the service. Hearn will need to unfurl a massive ad spend to raise
awareness of DAZN and his boxing content. This would be a significant undertaking
for any boxing promoter, but consider that Hearn is a relative novice in the
American media market; in publicizing his fights and the DAZN steaming
service, he will make missteps, which is natural for any startup venture.
There's no blueprint for how this could work so there will be a lot of
trial-and-error, which will lead to millions in capital that will be poorly
allocated.

IV.
Cord Cutting and Chasing the Next Generation

In 2011,
the flagship ESPN network was in 100 million homes. The number is now somewhere
between 85-87 million. With the steady rise of cable bills and the
changing consumption habits of younger generations, more and more people have
opted to forego cable. In the industry, these consumers are called cord
cutters. Many cord cutters pay for streaming services like Hulu, HBO Go or
Amazon Prime and the total that they spend works out to a significant monthly
savings.

For
decades, cable companies have resisted the notion of skinny bundles of channels
or a la carte cable, whereby consumers have more choice in which stations they
receive. The fear for the more expensive basic channels like ESPN is that
consumers would reject the station's per-month fee if they knew how much of
their cable bill went towards the network. For smaller channels, they believe
that they would never gain exposure if they weren't part of a larger cable bundle.

Thus, a
consensus emerged in the cable industry to keep the standard package at
hundreds of channels. Everyone made out well – networks, advertisers, cable
companies – everyone except the consumers, whose monthly bills to the cable
company zoomed past $100 dollars and even beyond $200 once high speed internet
and premium channels were included. Eventually something had to give.

Courtesy of Mikey Williams/Top Rank

If ESPN,
one of the most popular channels in the U.S., can lose 15% of its subscriber
base in a few short years, then no channel is safe from the realities of cord
cutting. Stations have been partnering with OTT services or creating their own
to ensure that their programming remains available for cord cutters. In short,
it's easy to see why there's so much fear in the industry. Unfortunately for
the industry's sake, cord cutters are able to buy homes and reproduce. In time,
more and more homes will reject cable. At a certain point, the existing model
that has sustained the cable TV industry will collapse. There won't be enough
subscribers paying full retail prices to maintain the existing cable paradigm
made up of large bundles of channels with healthy per-subscriber fees and ad
revenue for the major networks.

With all
of that said, it seems odd that ESPN has the tail wagging the dog here. By
forcing hardcore boxing fans to its OTT service to (legally) watch specific
high-profile fights, it's directing eyeballs away from its linear network.
Business Insider estimated in 2017 that $7.31 of every cable monthly cable bill
went to ESPN (estimates now put this number for all the ESPN channels at closer
to $9 per month). As of now there will be a number of ESPN+ subscribers who
will pay for both the ESPN linear channels and the app. But eventually there
will also be millions more who will cord cut. Of course ESPN could eventually raise
its monthly rate for the app, but this smacks of an incentive structure that is
designed to tread water at best. By encouraging more people to leave its linear
network, ESPN hopes that it can somehow retain them as future users of their
app, for less money than they are making off their consumers now. It's a
strange business case.

There
are still 85 million ESPN viewers and a fraction of them have ESPN+, yet why is
the network in such a hurry to ditch the power of its linear channel
programming base?

V.
Challenges Attracting Fighters

Fighters
want get paid, but they also want to be seen. Certainly there will be a few
high-profile boxers who will join with Hearn for big paydays on DAZN. I'm sure
that there are PBC fighters who are unhappy with the trajectories of their
careers, how much they are making per fight and their activity level. Hearn is
promising at least three bouts a year for name fighters; that and hefty purses
are attractive plums.

But
there are significant risks for those considering the jump. 1. Who will be
watching their fights? 2. What type of opponents will they face? 3. Will they
be frozen out against fighters who regularly appear on Showtime, HBO or ESPN?

At first
there won't be a critical mass of users for DAZN. Fighters taking the leap to
DAZN will face a similar problem that Crawford does with the Horn bout. It's
all well and good to make real money but if top boxers are fighting in front of
far fewer eyeballs, then their career momentum will stall. Yes, Hearn's money will
provide a level of security but if the goal is to become the best, and to fight
the best, will Hearn and DAZN allow those eventualities to happen? Is
Hearn tied more to his fighters or his streaming deal?

Can
Hearn guarantee top opponents? I'm sure that he will work the rankings
organizations to get title opportunities. He'll find fighters within the Top-15
of a ranking organization to maintain a title run for one of his boxers. But
can he provide the right opponents so his fighters can see their careers
progress? If the best opponent he can find is the #14 guy in the WBA, who toils
in the relative obscurity of Hungary or Ghana, then is he really moving his
boxers forward? No one wants to see top fighters against soft
opposition, a scenario that doesn't benefit the sport, and one that certainly
could happen, especially over the first few years of the DAZN deal.

In
addition, will Hearn's fighters be contractually bound to DAZN? Will they be
allowed to appear on other networks for unification or other major bouts?

VI.
Hearn and Building an American Brand

Top Rank
enjoys several advantages over Matchroom in the American market. The company
has a proud tradition of building fighters in the U.S. With boxing executives
like Bruce Trampler, Brad Goodman and Carl Moretti, the company has decades of
experience in signing and developing American boxing talent. And while Top Rank
faces significant challenges in attracting fight fans to the ESPN app, at least
it has a track record of putting butts in the seats and a successful blueprint
for turning talented boxers into stars.

Despite
the announced eight-year time horizon of the DAZN deal, Hearn seems primarily
concerned with the initial two guaranteed years. According to a source in the
industry who has viewed four Hearn/DAZN fighter contracts, each contract has
terms for three bouts over an 18-month duration. It's surprising that Hearn
isn't dangling longer-term deals at this moment, especially when he's going to
require a leap of faith for his initial batch of DAZN boxers. Certainly he
faces pressure to build an attractive stable of recognizable American fighters
in order to drive subscriptions, but is he also planning for success? What is
his blueprint for years three, four and five?

At a
minimum, if Hearn only broadcasts two significant bouts per show as part of his
16-fight deal, he will have 64 fighter slots over a calendar year. He will need
to sign 12-15 American or American-based fighters to help fill that
inventory. Sure he'll poach a few from Haymon or others and
integrate a few of his British boxers into his American shows, but for
Hearn to have a successful eight-year run, he's going to have to introduce new
talent, and he can't count on the low-hanging fruit of disgruntled fighters
from other stables; Hearn will need to develop from within to maintain a viable
series.

Although
Hearn is a familiar figure in America to hardcore boxing fans, he isn't a known
commodity to the fighters, trainers, managers and gym owners that populate the
U.S. boxing scene – those who help to create talent pipelines within a given
market. Everyone in the industry is familiar with Top Rank. Golden Boy has
significant visibility and name recognition in America. Hearn doesn't have any
of those brand advantages. For Matchroom to build and develop an American stable, the company will need to
be present in many regions of the country, stage fights throughout America,
sign fighters out of the bustling gyms of Southern California and Texas, and
attract top U.S. amateur talent.

In order
to attract top American fighters, Hearn will have to build out his executive
roster, and he has already started by adding a former RocNation and Banner
Promotions executive, Josh Roy, as Director of U.S. Operations. For the DAZN
deal to work Hearn needs to acquire more expertise in the American market,
specifically for staging and promoting successful events, marketing and media
relations, matchmaking, building shoulder programming, and gaining access to
key stakeholders.

Hearn
could conceivably go in a number of directions to add to Matchroom's presence
and reach in America. Perhaps he makes a deal to buy Main Events' stable
outright, offering Kathy Duva a piece of the action. Maybe Hearn breaks bread
with Lou DiBella, who certainly knowns the boxing business as well as anyone in
the U.S. It would be wise for Hearn to contact international talent scouts/managers
such as Sean Gibbons and Samson Lewkowicz to see if they can somehow be brought
into the fold. Certainly there are disgruntled employees at HBO that he could
poach. In addition to acquiring attractive boxing talent for his launch, Hearn
is going to have to make bold moves behind the scenes as well.

VII.
Will OTT be a Good Move for American Boxing?

What I'm
most interested in is whether the ESPN+ and DAZN platforms will be additive for
American boxing. That is, will these new platforms help grow the sport? Sixteen shows a year from DAZN, 24 from Top Rank and a bustling Showtime
Boxing program means that there is the potential for more high-quality fights
in America than there have been in recent years. But that's not a certainly. This
scenario could also be a mere rearranging of the deck chairs, whereby some
fighters change their promoters but the sport as a whole remains at its current
level.

Hearn
has been successful in growing boxing in the U.K. Anthony Joshua has sold well
over 200,000 tickets in his last three fights. Hearn has wisely brought boxing
to areas throughout the U.K, from London to Manchester to Hull to Birmingham to
Sheffield to Cardiff to Glasgow. He has adapted savvy production elements in
the staging of his big fights. The atmospheres he builds at his U.K. live shows are terrific. He has helped to cultivate a new generation of boxing fans.

For
Hearn's DAZN deal to succeed, he needs to present memorable matches with
fighters that boxing fans care about. He's must create shoulder programming
that builds up his fighters and major boxing events. He's going to have to
brand his programming with the U.S. boxing public, so that his fights will be
able to stand out in the crowded boxing marketplace. As he did in Britain, he
must take his show on the road. He needs to hit up cities in the U.S. that have
lots of boxing fans but have been underserved with live events, in places like
Chicago, Boston, Atlanta, Orlando, New Orleans, Kansas City and San Francisco,
to name a few.

Ultimately,
it's important to remember that a good deal for Top Rank or Hearn doesn't
guarantee that their respective deals will be beneficial for American boxing as
a whole. Top Rank found a home for its fighters as HBO continued to slash its
boxing budget and commitment to the sport. I wouldn't say that the ESPN deal
was a life preserver for the company – Top Rank would have eventually found
another deal – but ESPN certainly provided the company with a safe harbor.

One
former boxing television executive told me that the Top Rank-ESPN deal is great
for Bob Arum's grandkids. Meaning, that there won't be an immediate financial
windfall for the company, but over time, as more consumers turn to streaming
for content, Top Rank could potentially do very well. ESPN has the brand
awareness and corporate commitment to become the number-one sports streaming
site. Disney (ESPN's corporate parent) can afford to write off app-associated
losses and survive lost revenue during the transition to content streaming. The
company is viewing the rise of OTT through a long-term time horizon and Top
Rank, perhaps the most stable U.S. boxing promotional company, is following
suit.

Win or
lose, Hearn still has a strong base of support in the U.K. and the backing of
Sky (his U.K. broadcasting partner). He will continue to promote 16 shows a year in
Britain, irrespective of the success of the DAZN deal. But will Hearn remain committed to growing
the sport in the U.S. if the first few years of the DAZN deal aren't
successful, or will he merely cut his losses and return to England? Is he
committed to the American market for good? I'm sure that's a question that many
fighters will be asking him over the next few months.

I'm
happy that the DAZN deal will lead to several fighters getting paid far better
than they currently are. Boxers have short windows to earn money. Making $3
million a fight instead of $1 million is life changing money for almost
all. In addition, it was clear from the previous attempts of RocNation to
sign PBC fighters that many of Haymon's top boxers were underpaid relative to
what the market would bear. I hope that Hearn's entrance into the U.S. will
force competing entities to increase their fighters' purses.

Ultimately,
the success of the Top Rank-ESPN and Hearn-DAZN deals will be predicated upon
meaningful fights between top talents. The television product must be strong.
Fans have to want to buy tickets to these events or commit to viewing the
content via OTT platforms. On paper, there doesn't seem to be enough stars in
the U.S. boxing market for all of the big players (Hearn, Top Rank, Haymon and
HBO) to succeed. New talent must be identified, supported and built for the
sport to grow.

Significant
capital has been put into play to bet on the future of American boxing.
Certainly this is a positive for the sport as several outside groups believe
that boxing is worthy of investment. One wouldn't expect all of these boxing
models to work; there will be winners and losers.

American
boxing needs one of these big bets to pay off. Over $500M was spent in PBC's
attempt to grow boxing in the American market and that model did not succeed.
Streaming presents a new frontier for the sport. Will American boxing be
successful in attracting new fans via OTT, or are these ventures another link
in the nearly unbroken chain of the sport's decline from mainstream to niche? It will be fascinating to watch the machinations of the key players over the next several years, but ultimately, it's most important that one of them succeeds.